Category Archives: Form ADV

Division of Investment Management Requests Extensions of Deadlines for Mid-Sized Advisers and Private Fund Advisers

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IA Watch is reporting that the Division of Investment Management has formally requested that the Securities and Exchange Commission (SEC) move to next year the deadlines for mid-sized advisers (certain advisers with between $25 million and $100 million in assets under management) to switch to state registration and for private fund advisers with more than $150 million in assets under management to register with the SEC.  IA Watch states: “The formal request moves this closer to becoming reality, should the Commission act on it.”

Robert E. Plaze, Associate Director of the Division of Investment Management, had suggested that extensions to the first quarter of 2012 were a possibility in his April 8, 2011 letter to David Massey, President, North American Securities Administrators Association, Inc. and Deputy Securities Administrator, North Carolina Securities Division.

“We anticipate that the Commission will complete its implementing rulemaking by July 21,2011 in accordance with the Dodd-Frank Act, but expect in connection therewith that the Commission will consider providing additional time for investment advisers affected by these provisions to come into compliance.”

With respect to the switch of mid-sized advisers to state registration, Mr. Plaze’s letter noted that once the SEC  adopts the implementing rulemaking, the Investment Adviser Registration Depository system (lARD) will “require re-programming to accept advisers’ transition filings” and that they “understand that the re-programming process will take until the end of the year to complete.”  As a result, under consideration was the possibility that  “all SEC-registered advisers would be required to report their eligibility for registration with the Commission in the first quarter of 2012.”  He went on to say that, even if the implementing rulemaking is completed prior to July 21, 2011,  private fund advisers will need time to register and come fully into compliance with the accompanying obligations, and that they “expect that the Commission will consider extending the date by which these advisers must register and come into compliance with the obligations of a registered adviser until the first quarter of 2012.”

IA Watch‘s report is not surprising given recent reports in industry publications (including a May 2 report by IA Watch) that SEC staff members have indicated the expectation that the delays will go through.  One such statement was reported to have been made by Sara Crovitz, a Branch Chief in the Office of Chief Counsel in the Division of Investment Management, as  a participant in a DC bar luncheon panel discussion on “Cross Border Issues Affecting Investment Advisers in the World of  Dodd-Frank.”

SEC Division of Investment Management Staff Responds to Questions about Form ADV Part 2

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On March 18, 2011, the staff of the SEC’s Division of Investment Management issued responses to questions about the amended Part 2 of Form ADV.

The Division answered questions regarding the following topics, generally restating information already known about the compliance dates for delivery questions, but providing guidance not previously offered on the remaining issues:

  • compliance dates for delivery of Part 2A and Part 2B
  • Part 2A brochure format, material change and risk disclosure, filing and delivery requirements
  • “covered persons” for Part 2B brochure supplements
  • Part 2B brochure supplement delivery requirements

Among the responses offered are the following:

  • An offshore adviser whose only clients are offshore funds would not have to prepare or file a brochure as part of its Form ADV. (Question II. 6)
  • An adviser that is not required to deliver a brochure, but nevertheless chooses to prepare and deliver one, is not required to file the brochure with the SEC. (Question III. 1)
  • An adviser to a hedge or other private fund could meet its delivery obligation to the fund client by delivering the brochure to a “legal representative of the fund, such as the fund’s general partner, manager or person serving in a similar capacity.”  In its response, the staff cites the U.S. Court of Appeals D.C. Circuit 2006 decision in Goldstein v. Securities and Exchange Commission (“Goldstein”) that the “client” of an investment adviser managing a hedge fund is the fund itself and not any of the investors in the fund. (Question III. 2)

Despite the Goldstein decision, many advisers provide copies of their brochures to all investors in their funds, as a matter of best business practice.   It is expected that many advisers will continue to do so, as a matter of best business practice, despite the staff’s response to Question III. 2.

In their introduction to these responses, the staff of the Division of Investment Management state that they expect to update the site with their responses to additional questions “from time to time.”    Investment advisers  will continue to look for further guidance from the staff.

The full text of the Division of Investment Management staff responses may be found here and the final rule adopting the related amendments to Part 2 may be found here.

Webinar Replay: The New Form ADV Part 2

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The SEC recently published the adopting release containing the changes to the new Form ADV Part 2. The Form ADV is the brochure that all SEC registered advisers are required to complete and update. The format of the new ADV Part 2, which will be publicly available, has changed from the old “check the box” format, to a new, more “narrative” plain English approach.

On September 30, 2010, HedgeOp Compliance CEO Bill Mulligan lead a webinar focusing on the following questions: (i) what are the key changes between the old and new forms?; (ii) what is the format of the new form and what content does it include?; (iii) when does the new ADV Part 2 need to filed with the SEC?

You can watch the seminar and download the presentation materials below.

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Download Presentation Materials

Download the new ADV Part 2 form and instructions

SEC Publishes Revised Form ADV Part 2

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This is a follow up on our July 21 blog post reporting that the SEC announced approval for amendments to Form ADV Part II – now officially renamed “Part 2″), which  (among other things) will require advisers to make their brochures publicly available via electronic filing, and will change the format of the brochure from its current “check the box” approach to a more narrative, “plain English” approach.

On July 28, the SEC published the Adopting Release along with the revised Form ADV Part 2 .  More on the specific disclosure items contained within the new Part 2 will be discussed on upcoming blogs.

SEC Approves Form ADV Part 2 Amendments to Require Narrative Disclosure and Electronic Filing

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On July 21 — the same the day that President Obama signed into law a landmark piece of financial legislation that (among other things)  significantly increases the number of managers that will be required to register with the SEC as investment advisers — the SEC voted unanimously to adopt significant amendments to the Form ADV Part 2, which is the principal disclosure document (commonly referred to as the “brochure”) that an SEC-registered investment adviser must provide to its clients and prospective clients.

As described more fully below, the amendments will (among other things) require advisers to make their brochures publicly available via electronic filing, and will change the format of the brochure from its current “check the box” approach to a more narrative, “plain English” approach.

The amendments are intended to substantially improve the quality of the disclosures advisers provide to their clients.  As stated by SEC Chairman Mary L. Schapiro:

“These changes are designed to provide clients with greater information about the individuals who will provide them with investment advice.  These amendments will help transform the brochure into a plain English narrative that is well-suited to serve investors’ needs and describes the adviser’s conflicts, compensation, business activities, and disciplinary history.”

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